Open banking is an innovative approach that has a massive potential to change the dexterity of banking and financial operations in the coming days.
The concept of open banking has already changed a lot of things in the financial industry and will only keep growing with time.
It leverages the power of science and technologies to simplify and streamline complicated tasks with various unique approaches to benefit (both) the service providers and consumers.
This article explains how open banking revolutionizes banking sectors and which top open banking companies are currently revolutionizing the payment industry.
Let us begin with the basics.
What is open banking?
Open banking is an initiative or a banking practice that permits third-party (economic service providers) to have consensual and open access to a bank’s or other non-bank financial institution’s customers’ banking data, transactional histories, and additional financial information through dedicated APIs (Application Programming Interface).
This approach allows easy sharing of financial details across banks, Fintechs, and third-party service providers.
Authorized banks, TPPs, and Fintechs can access and analyze consumer data using the host’s API and utilize the extracted information to design and create tailored products for those consumers.
How open banking is revolutionizing the payment industry?
We discussed the basics of open banking and how it is helping consumers and financial and non-financial establishments.
In this section, we shall discuss some pointers to see how open banking is revolutionizing the payment industry.
1. Compelling Global Adoption
Open banking leads to a transparent and evident financial market that enables consumers to analyze the metrics and decide to address the situations and reach their monetary goals. It has simplified the collection and analysis of financial data to make appropriate judgments for (both) lenders and takers.
This approach is compelling in its Global Adoption. Customers want the best possible advantages on their side, increasing the demand for open banking from their service providers. Establishments should keep up with the needs of consumers to stay in the competitive market.
Data published by GlobalLogic shows that the API call volume increased from 66.8M in 2018 to nearly 6B in 2020. Another data by Vantage Market Research indicates the growth of the Global Open Banking Market to reach 37.73 Billion by 2028.
These metrics (clearly) suggest the global adoption of open banking at a significant pace.
2. Assurance of optimal security
Data security has become the most important element in any digital financial transactions and e-wallet solutions, and the same goes for open banking companies.
Digital payment frauds and data breaches crumble the whole open banking system, which is why optimal security is an unavoidable facet.
And the important thing is open banking companies have lived up to the standard of the mandated security to keep customer data and critical assets safe from attackers and hackers.
Whether (it be) through stronger client authentication using 2-step verifications or (the use) of PSD2-compliant APIs, open banking companies have found the solution to fight against data breaches, cyber attackers, and frauds.
One way or the other, these companies have created a highly secured, safer financial environment to carry on transactions and share your personal information without worrying about misuse and thefts.
3. Financial operation automation and acceleration
Open banking is an automated initiative that allows the safe and secured sharing of data and information among the authorized banks, Fintechs, and third-party establishments for swift and reliable financial operations, benefiting (both) customers and service providers.
The complete, accurate, and trustworthy financial information accelerates and streamlines the application processes like credits, loans, and mortgages.
The online payment process speeds up the transactions by a significant rate without compromising security and reliability.
4. Accessibility via modern banking solutions
Conducting financial operations from a place of your comfort is much better than physically visiting banks and other establishments to do the same.
Banking operations available on your devices that anyone can complete within a few clicks and swipes enhances customer experiences to another level.
With reliable internet access, customers have the upper hand in conducting transactions and the flexibility to do so from any device, anywhere, and everywhere. Open banking is simplifying banking operations through various customized approaches.
These all shiftings create customer-based financial operations that benefit consumers and the monetary establishments (as well). Every modern-day company should prioritize customer satisfaction for better sustainability and prolonged longevity.
5. Promoting coexistence; eliminating competition
Open banking solution facilitates co-existence between banks and other TPP like Fintechs and other financial & non-financial establishments. They share consensual data (between them) and design their work structure accordingly to benefit themselves and related parties.
They no longer have to compete with one another in open banking. In contrast, authorized companies link and share their infrastructures to collaborate to plan and design creative products and services for the consumers to meet their needs under affordable financial circumstances.
This open approach allows establishments to expand and scale freely and ensures a seamless customer experience with guaranteed sustainability and longevity.
Above are some (of the) major pointers depicting how open banking revolutionizes the payment industry. Now let us explore the top 5 open banking companies revolutionizing the payment industry.
Top 5 open banking companies revolutionizing the payment industry.
Plaid is an aggregation platform that functions as a third-party channel between multiple application companies and banks. This company creates secured data transfer networks to power the digital finance networks and Fintechs.
Plaid was established in 2013 by William Hockey and is based in San Francisco, California. It collaborates with big names such as Square, Rhino, and Robinhood to access customer information.
Plaid recently launched Plaid Exchange, which links over 1000 monetary establishments with an array of associates and provides full-service open banking features.
Tink aims to create a better platform for developers and financial service providers across Europe for a seamless customer experience. It helps establishments to unify various aspects into a single interface.
Tink combines the abilities of payment initiation (PIS) and aggregation (AIS) with personal finance management (PFM) and data enrichment features and products for a top-notch customer experience and better productivity.
Now a part of VISA in 2022, Tink was founded a decade ago in 2012 to revolutionize the banking industry. We can say it has lived up to expectations with 250 million-plus bank customers and 10,000 developers actively using the platform.
Truelayer specializes in creating exceptional APIs with banks and usually functions as an intermediary between associates. It simplifies the process of accessing customer data and triggering payments whenever needed.
Truelayer isn’t a full-fledged payment company; still, it provides the essential banking payments that help merchants integrate next-gen financial and payment data into any desired app.
Truelayer is a London-based company that aims to open up finances and change the way of payment globally.
Yapily aims to create fairer and better financial services for everybody through the influence of open banking. Establishments can use Yapily’s proprietary open API to access required economic information and design projects to meet every customer’s expectation.
Yapily is an emerging London-based company established in 2017 that has (already) collaborated with big names like IBM, QuickBooks, and GoCardless.
Yapily’s scalable open API delivers seamless access to customer data and information and operates behind the scenes allowing your product to become the center of attention.
Apigee is a medium utilized for creating and managing APIs. With Apigee, you can abstract your backend APIs and implement features like rate limiting, quotas, analytics, and more.
Apigee was initially established as Sonoa Systems in 2004 and rebranded as what it is known as now in 2010. Google acquired Apigee in 2016 for a worth of $625 million.
You can create various API packages, payment gateways, revenue models, and developer portal integrations using Apigee. Its services are limited to API management features but benefit from natural Google Cloud integration.
How does Open banking help customers?
Open banking helps customers gather insight on various financial aspects, scour and analyze multiple financial services, account aggregation, manage personal finances and auto subscriptions, and more.
In-depth, we discuss how open banks can help customers through various use cases.
1. Open banking facilitates account aggregation
Account aggregation might be the most useful aspect of open banking for customers. It helps unify (all) customer accounts from various service providers into a single interface.
A single interface lets customers keep track of every financial activity. Consumers can view their investment accounts, credit card information, loan accounts, mortgage details, and other finance-related data at one interface.
This aggregation will help customers maintain their finances at (both) personal and business levels.
2. Open banking aids personal finance management (PFM)
Open banking has given rise to adequate personal finance management (PFM) tools over the years, helping consumers to overview their financial status easily and efficiently. These tools also integrate account aggregation for streamlining financial information into a single interface.
Basically, these tools create a clear financial insight for customers so they can manage their (personal) finances better and effectively. Consumers can plan their expenses accordingly, and Fintech and other service providers can (also) leverage this data to provide users with tailor-made products and services within the budget.
Personal finance management becomes centralized and easier with open banking.
3. Boost credit applications and customer experience
Banks and financial and non-financial establishments can easily gather applicant information for an instantaneous outline of their credit history. This process simplifies service providers’ (lenders) jobs and customers also.
The other aspect of open banking is that consumers have various options to conduct businesses to increase their credit scores. It also helps customers find products and services with a greater possibility of approval and enhance their credit scores.
4. Subscription surveillance and management
As explained earlier, open banking aids PFM through account aggregation. It also helps consumers manage their subscriptions to various service providers. It unifies all subscriptions to a single interface assisting consumers in analyzing their expenditures.
Customers can easily detect unwanted subscriptions that auto-renew and feed on consumer accounts if not manually canceled. These subscriptions remain hidden, and not all consumers can locate them manually.
Open banking companies, help customers survey their current subscription status and act accordingly.
Conclusion: Future of open banking companies
The scene of open banking will take time to mature, but surely, we shall experience its rapid growth in the coming years. With the help of innovative technologies emerging on a daily basis, it is for sure that open banking will reach its maximum within no time.
Open banking companies have a bright future if they keep grinding and selling their dreams of easy and secured banking from anywhere and everywhere to the customers. This trend will not fade (away) with time, so open banking companies can leverage it and incorporate various innovative techs and ideas to revolutionize banking, Fintech, and their associates.
Are open banking and PSD2 the same thing?
Open banking and PSD2 aren’t the same things. Open banking is a design that allows a secured sharing of banking information among authorized associates like banks, fintechs, and third-party establishments. In contrast, PSD2 is a directive, European Union legislation that controls the design and operation of open banking.
Does open banking only apply to online banking?
Yes, open banking only applies to online banking; consumers should have any online financial account like credit cards, 2-money accounts, etc., to use open banking services.
Is open banking free?
Open banking APIs developed by banks are free. In contrast, most third parties charge money for their products and services. A few of them have free APIs as well.
Do I have control over my financial data in open banking?
Yes, you have the right to approve or disapprove of sharing your financial data. The banks can only share consensual data with the authorized associates in open banking, and you, as a consumer, have the right to consent or not, as you will.